My, what a difference a year makes. Not to belabor the point, but the broad market indexes are now deep in bear market territory. Some investors think the end of the unprecedented, historic, amazing bull market is officially over.

        The Nasdaq Composite Index is 63 percent below where it was a year ago; the Standard & Poor's 500 Index is 25 percent below where it was a year ago.

        A primary reason: consumer confidence.

        It almost seems odd how manic-depressive investors have been in the past 12 months. At the beginning of 2000, almost nothing could hurt U.S. markets. Investors just kept pouring money in.

        But now, almost nothing seems to help. Interest rate cuts and promises of tax cuts have done little to restore a shattered optimism.

        Surveys show that Americans now have the lowest level of confidence in the U.S. economy since 1997. Much of the decline has come in the last few months.

        According to an ABC News/Money magazine poll, 58 percent of Americans in early March said the economy is in good shape compared with 77 percent in December and 80 percent in January 2000.

        The poll showed that 64 percent felt good about their personal finances. That's not as bad as the 42 percent rating in March 1993.

        But it's still down from 67 percent in December and a record 70 percent in January 2000, during that great rally.

        And that 64 percent also was reported before this week's selloff that took the Nasdaq down to its lowest level in 27 months and the S&P into official bear territory.

Earnings gloom

        The 180-degree turnaround started just about one year ago when — for the first time in years — a few companies said their earnings weren't growing as fast as predicted. Then several others issued warnings, and then many more.

        So many warnings later, and market watchers have just come to expect disappointing earnings. Analysts continue to lower their estimates, and investors just expect the worst.

        “It's still a tight market out there,” Fifth Third's Steve Mygrant said. “Investors are still looking for a bottoming out in fundamentals before getting any more confident. Investors just aren't sure they've seen the bottom or the worst in companies' fundamentals.”

Prices doom

        While earnings growth has slowed down, investors decided that earnings actually mattered again. In the frenzy that sent the Nasdaq above 5000 last March, investors cared more about a company's earnings potential than its earnings reality.

        That meant a return to more historical valuations, and that meant a return to Earth for overblown stock prices.

        But to Joe Evelo, senior vice president with Salomon Smith Barney/Evelo Group, downtown. both extremes were a little extreme.

        “It's not like we weren't due some comeuppance,” Mr. Evelo said. “But come on, it's really somewhere in between, folks.”

        Amy Higgins writes about personal finance for the Enquirer. You can reach her at 768-8373; ahiggins@enquirer.com; or Your Money, The Cincinnati Enquirer, 312 Elm St., Cincinnati 45202.
       

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